Working with a global procurement company can directly contribute to reduced sourcing costs and increased overall annual savings. Traditionally, materials procurement has relied heavily on manually intensive efforts, which often leads to a scattered approach without proper emphasis on long-term sustainability.
A professional strategic sourcing company like Dragon Sourcing works closely with your procurement teams and identifies saving opportunities across all spend categories, building organizational strength by accurately determining comprehensive landing costs that maximize value throughout the procurement process.
If you want to know more about how we approach strategic procurement, get in touch with Dragon Sourcing with your requirements, today!
Types of procurement
At Dragon Sourcing, our strategic procurement process allows you to draft an effective framework for reducing losses across the procurement process. Sourcing materials can be widely divided into two categories, i.e., direct materials and indirect materials.
- Direct materials
Direct materials are essentially materials that are directly built into the final product. A straightforward example of this would be the raw materials or ingredients that are combined to make the final product. In manufacturing industries, direct materials take up the largest share of total spending. They dictate competitive advantage, innovation potential, and customer satisfaction.
For procurement purposes, direct materials are easy to identify and are directly linked to the cost of production. A strategic sourcing company like Dragon Sourcing can help you identify the best suppliers in emerging and established markets who can match your demands while keeping up the quality standards. Consequently, you can cut down on procurement costs and strengthen long-term supplier relations.
- Indirect materials
On the other hand, indirect materials are the materials that are either used up partially or completely during production and do not form a part of the final product. This category of products includes safety gear, production equipment, electricity, catalysts, transportation, insurance, etc. While indirect materials are an important part of the production process, it is impossible to gauge the exact cost of a specific product.
Companies typically in the manufacturing and industrial sectors looking to reduce production costs often look to shift operations to an overseas facility proficient in that product category. Dragon Sourcing acts as your local procurement team in overseas markets, vetting production facilities for you and evaluating them on multiple factors like corporate social responsibility, quality standards, ethical sourcing, etc.
Direct materials vs direct procurement
While often used interchangeably, direct materials and direct procurement are not one and the same thing. As discussed above, direct materials encompass every material that ends up in the final product. For example, in a shoe business, it can include sourcing materials like leather, cloth, paint, fiber, etc.
Direct procurement, on the other hand, involves purchasing final products in one or many batches. Therefore, the cost involves the expenses of direct and indirect materials and services linked to the process. In the example of the shoe business above, direct procurement involves outsourcing the production to a shoe-making facility and paying for the finished product.
If you are wondering why we need to set up this distinction, it is because the method of sourcing has a direct impact on the end product and the overall profitability of an organization. For instance, direct materials procurement is a labor-intensive process and you are only cutting costs on the price of the raw materials. This is great if you have an excellent R&D team and a cost-effective production facility.
Similarly, direct procurement is heavily dependent on market volatility and price fluctuations. If working with global suppliers in emerging markets, you can face issues like heavier load times, delayed shipments, etc.
Why work with Dragon Sourcing?
Dragon Sourcing is one of the best procurement service providers in the world and focuses on delivering sustainable value to our customers. We work with SMEs and MNCs looking to procure goods and services from emerging markets to sustain their operations or export their products. Whether your objective is to source materials from emerging markets or shift the entire production team to an offshore location, we can help you make better decisions for your business.
To deliver value to a business, it is crucial to have in-depth visibility into current procurement costs and market fluctuations. Dragon Sourcing’s procurement intelligence works by delivering key insights into various product categories and markets. We filter out unnecessary and irrelevant data quickly, allowing businesses to visualize profit-making opportunities and make better decisions.
We are supplier independent and conduct our analyses objectively without bias. Dragon Sourcing can provide you with complete market analyses and regular price forecasts, allowing you to hit your annual procurement savings target. Rest assured that you will get highly reliable metrics and dashboards that you can use to monitor programs at high levels.
To know more about how we enable sourcing materials for various industries, get in touch with customer representatives today.